Artificial intelligence is not a matter of science fiction nor a futuristic vision anymore; it is a reality that is transforming every human activity today. In fact, the question is not whether AI will change the world, but to what extent it will do so and how we should prepare for it. In this new sphere of technological revolution, two global powers are competing in a new race to claim the next great technological frontier: the United States and China.
The latter recently disrupted expectations, not only with the emergence of DeepSeek at the beginning of the year, but for its clear achievement in securing most of the value chain to produce its own chips. Although China has been developing its own “Silicon Valley” for years, it is only now starting to brag about its first conquests. The secret behind this success is not just the private investment of billions but also long-term investment in human capital.
As this fierce rivalry between two technological titans emerges, Europe finds itself at a crossroad, wondering whether it has “missed the train” or if there is still something it can do to avoid falling behind, not only in AI, but in all aspects related to the next wave of technological innovation: blockchain, the metaverse, quantum computing, and other emerging fields. The real question is how to achieve this.
Above all, it is now well known that beyond business and science, AI plays an increasingly decisive role in shaping public opinion, electoral processes, and how nations compete on the geopolitical stage, from the economy to warfare. No aspect of society remains untouched; even the arts are evolving, as AI-generated content challenges traditional notions of human artistic expression.
The Industrial Revolution expanded so drastically because it mechanised energy processing. However, this new digital revolution is automating information processing. In other words, while steam engines competed with the muscular strength of workers, AI competes with humanity’s most defining capability: intelligence.
The US billion-dollar stakes
The idea of “manufacturing” intelligence has sparked a new gold rush, pushing tech giants to invest billions of dollars in an attempt to dominate this rapidly transforming landscape.
Just weeks before DeepSeek’s entry into the scene, a wave of new investment announcements echoed from Silicon Valley. Apple announced a $500 billion investment and the hiring of 20,000 people over the next four years. Microsoft revealed its plans with another $80 billion for developing data centres to train AI models. Alphabet pledged $75 billion, while Zuckerberg’s Meta announced a $65 billion spend to enhance its AI infrastructure. OpenAI, the company behind ChatGPT, is also considering a $40 billion investment while resisting Elon Musk’s hostile $97 billion takeover bid.
These multi-billion-dollar investments positioned the US as the undisputed leader in this first phase. But, while all these announcements were unfolding, a silent Deepseek was about to cause a major shake-up with a significantly smaller investment and much lower computing power. This triggered a sharp drop in Nvidia’s stock price, the chip manufacturer essential for AI tools.
The flourishing AI scene in China
Naturally, AI in China was not exempt from private investment, as companies sought to develop their own products to compete with US tech giants. However, these investments were far more modest. For a long time, Alibaba did not produce anything particularly exciting, only a rather common “fork” based on Meta’s open-source language model, Llama. That said, as Alibaba released successive iterations of Qwen, its quality began to improve. Other Chinese internet giants, including Tencent and Huawei, are also making their own investments in AI model development.
Deepseek, however, has a different origin. In fact, the company did not even exist when Alibaba launched the first version of Qwen. The project was financed by High-Flyer, a hedge fund, created in 2015, that had prioritised fundamental research, and eventually becoming one of the country’s largest quantitative funds. It was not just about corporate investment but also building an innovation ecosystem without the urgency of immediate results.
This is why the founder of the fund chose Zhejiang University in Hangzhou, recognising that technological innovations are developed by people, not data centres or computing clusters. Ten years later, it now boasts a flagship product like DeepSeek and serves as the financial backbone of the so-called “Six Little Dragons,” a group of start-ups that also includes Manycore Tech and Deep Robotics.
Zhejiang University, or Zhe Da, has built a dynamic ecosystem of research and entrepreneurship, with significant investment in high-end equipment and top-tier scientists, hosting 70,000 students across various faculties on its vast campus.
An obvious point to note is that China’s rise in AI has been made possible largely thanks to American chips. However, what initially seemed like a win-win dynamic has increasingly started to favour China, as its AI domestic industry gains momentum and scale. In response, the United States has, in recent years, taken steps to slow the flow of advanced chips to China in an effort to hinder its progress and reduce potential competition.
Nvidia has ceased sales of some of its chip to Chinese manufacturers, and the Trump administration is working to rescind a complex export-licensing regime that was set to take effect last week. In its place, the US is expected to establish a mix of bilateral agreements aimed at protecting its interests.
In any case, it may already be too late to stop China from closing in on the American lead in AI, as the country shows no signs of chip shortages across its AI value chain. In fact, the restrictions seem to be pushing China toward greater self-sufficiency and reliance on domestic companies. Big tech firms like Alibaba and Tencent are building large numbers of data centres. Meanwhile, chipmakers such as Huawei, Hygon, and others are rapidly catching up.
The European route: regulation comes first
Against the backdrop of massive multi-billion-dollar investments by American tech giants and the talent-driven philosophy seen in Zhejiang University’s classrooms, the question remains: what path should Europe take?
The European approach seems to be different as it cannot compete on the same scale as US and China. The EU is focusing on driving AI forward in key sectors like healthcare, transport, and industry, aiming to bridge the gap between research and market-ready solutions. It has already committed significant funding, including €1 billion annually through initiatives like Horizon Europe and Digital Europe, and is looking to mobilise up to €20 billion a year in public and private investment over the next decade.
Recently, the European Commission also unveiled its AI Continent Action Plan, which aims to “transform Europe’s strong traditional industries and its exceptional talent pool into powerful engines of AI innovation and acceleration”.
But Europe’s approach is not just about technological progress, it is also about ensuring AI aligns with ethical values. The European Commission has proposed the Artificial Intelligence Act, a legal framework that classifies AI systems based on their risk level. However, under the EU’s ongoing simplification agenda, some of provisions of the Act might be subject to review. In addition, the General-Purpose AI Code of Practice has been delayed, after big Tech companies put pressure on the European Commission, provoking criticism among the NGOs.
Some might argue that this excessive regulation is what holds the European tech industry back compared to other global powers. Others, however, see it as essential to upholding European values and principles, particularly when it comes to protecting citizens’ privacy and safety.
Alí El Majjaoui, Communications Consultant